If you have a decent credit score and are in need of urgent cash, what you need to avail is a personal loan. The eligibility of personal loans varies based on your financial stability, age, credit score, and income. You will also need to have important documents like salary slips, KYC certificates, and IT return forms. However, these are facts that most people know about personal loans. There are many things that people are yet to know about personal loans and some of those facts have been mentioned as below.
- It is unsecured
A Personal loanis an unsecured debt and you do not need collateral to avail the loan. Thus, in case you default, you do not really lose anything much. However, it will show on your credit score and you need to be careful when you apply for personal loan online. The process has been made easier now due to the facility of online application where the process is completed in a really short time.
- It is convenient and easy
You can apply for personal loan onlinebut the amount that you will receive depends on your income, credit score, and eligibility. The rule of the thumb is that the higher your credit score, the more money you can borrow. But, there is always a limit on the amount of Personal loanthat an institution can offer you. The limit is never kept such that you have a problem in meeting the emergencies.
- Fixed interest rates
Most of the financial institutions provide a lock-in interest rate. This stays same throughout the period of the loan. Some of the financial institutions offer a floating interest rate. In the later situation, the rate of interest for the Personal loanis dependent on the market conditions and it can increase suddenly. You can research around a bit to find the loan with a low interest rate.
- Fixed repayment period
The period of repayment is fixed even before the loan is sanctioned to you. The period of repayment varies from one lender to another. The rate of interest is dependent on the period of repayment. Though the period of repayment is fixed, some financial institutions might find a way to make it flexible depending on the situation.
- Other additional charges
The interest is not the only charge you pay in case of a Personal loan. When the loan is processed, you will be charged the processing fees. It is a minor percentage of your loan amount and it is non-refundable. Some institutions will also charge you fees for prepayment because they lose out on the interest that you were about to earn.
- The potential risks
When you have a credit card, you can pay the debt off over an unprecedented time period. But the repayment period is fixed when it comes to a personal loan. It is good to pay off the debt fast because you can run into legal troubles if you fail to pay up with the tenure mentioned.
Availing personal loans is the right way of overcoming the period of financial strain. If you are planning to get a personal loan, these are the six things that you need to keep in mind. Also, make sure that you choose the right lender.